We recently compiled a list of the 11 Best Undervalued Stocks to Invest in Now. In this article, we are going to take a look at where The Goldman Sachs Group, Inc. (NYSE:GS) stands against the other undervalued stocks.
How Will Tariffs Affect the Market?
On March 5th, BBC reported that the US stock market had fallen after the tariffs sparked trade war fear. The recent imposition of tariffs by President Donald Trump on imports from Canada, Mexico, and China has sparked significant concerns about a potential trade war. The United States has imposed a 25% tariff on most imports from these countries, with Canadian energy products facing a 10% tariff. On the other hand, tariffs on Chinese imports have been increased from 10% to 20%. As a result, Prime Minister of Canada, Justin Trudeau announced immediate tariffs on $30 billion worth of US goods, with plans for additional tariffs on $125 billion in goods over the next three weeks. Moreover, China imposed tariffs ranging from 10% to 15% on various US agricultural imports, such as chicken, pork, and soybeans. The tariffs have raised fears of inflation and a broader trade conflict, leading to a decline in US and global stock markets. As a result, the S&P 500 experienced a significant drop, and European markets also closed lower.
Today, Richard Fisher, former Dallas Fed president, appeared on a CNBC interview to talk about the recent tariffs and their impact on the market. Fisher stated that a tariff is a cost factor that goes into producing and distributing a product, making it a form of tax. Business operators of all sizes have to figure out a way to protect their margins against the impact. On the other hand, the Federal Reserve has to gauge the amount of revenue it would generate from these tariffs considering it is slowing down the economy and can cause inflation as the companies will have to raise prices to maintain their margins. Moreover, Richard Fisher noted that such tariffs take a long to be digested, as businesses don’t change something overnight. The only way for companies to maintain their margins without increasing prices is by increasing productivity, which again does not happen overnight and takes time.
While talking about how the Fed might react to the tariffs, Fisher mentioned that it is a little too early to guess. The Fed is bringing inflation down and we are getting closer to the 2% target, however, at the same time tariff increases the cost of doing business, which might slow down the economy and tickle up inflation. To conclude Fisher noted that tariffs won’t be digested quickly and will take time.
Our Methodology
For this article, we used the Finviz stock screener, Yahoo Finance, and Seeking Alpha. Using the screener we aggregated a list of stocks trading below the forward P/E of 15 and earnings growth expectations this year. Next, we cross-checked the Forward P/E from Seeking Alpha and Earnings growth from Yahoo Finance. Lastly, after sorting our list by market capitalization, we ranked the stocks in ascending order of the number of hedge funds holding each stock, sourced from Insider Monkey’s Q4 database of hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
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The Goldman Sachs Group, Inc. (NYSE:GS)
Forward P/E Ratio: 13.38
Earnings Growth This Year: 14.69%
Number of Hedge Fund Holders: 81
The Goldman Sachs Group, Inc. (NYSE:GS) is a major global financial institution that provides a wide range of financial services to various clients, including corporations, financial institutions, governments, and individuals. The company has proven its dominance by growing its revenue by more than 20% during the past 5 years.
It exercises its market edge by making strategic investments, arranging initial public offerings, and providing various financial products. During the fiscal fourth quarter of 2024, The Goldman Sachs Group, Inc. (NYSE:GS) $13.87 billion in sales, reflecting a 23% increase year-over-year. Moreover, the company also grew its assets under management by 12%, reaching a record high of $3.14 trillion.
On February 28, Jason Goldberg from Barclays maintained a Buy rating on the stock, with a price target of $760. Moreover, Ariel Appreciation Fund in its Q4 2024 investor letter stated the bank outperformed quarterly earnings, driven by its strength in investment banking, trading, and asset management segments. Goldman Sachs Group, Inc. (NYSE:GS) is one of the best undervalued stocks to invest in now.
Ariel Appreciation Fund stated the following regarding The Goldman Sachs Group, Inc. (NYSE:GS) in its Q4 2024 investor letter:
Several stocks in the portfolio delivered solid returns in the quarter. Global investment bank, The Goldman Sachs Group, Inc. (NYSE:GS) outperformed on a robust quarterly earnings beat, highlighted by strength across its investment banking, trading, and asset management segments. Meanwhile, the U.S. election has been widely viewed as a positive catalyst across the industry. Investors expect the incoming administration to 1 The “Magnificent Seven” are the largest stocks in the S&P 500 Index driving market performance: Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), Alphabet Inc. (GOOGL), Meta Platforms Inc. (META), Microsoft Corp. (MSFT), NVIDIA Corp. (NVDA) and Tesla, Inc. (TSLA). 2 Hobson, Mellody and John W. Rogers Jr. “What the Stock market Taught Us This Year: Don’t Fall for These Investing Traps.” Wall Street Journal, 5 December 2023. emphasize deregulation and exhibit a greater openness to business combinations compared to the prior regime. Hence, management’s positive commentary around the operating momentum of its core franchises, an improving M&A outlook, and the resilience of the U.S. economy sent shares higher.
Overall GS ranks 6th on our list of the best undervalued stocks to invest in now. While we acknowledge the potential of GS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
